Nike Inc. reported revenues climbed 17.5 percent to $6.1
billion from $5.2 billion, and increased 11 percent on a currency-neutral
basis. Earnings jumped 15.4 percent to 645 million, or $1.39 a share.
“We're off to a strong start in fiscal year 2012. We
have a powerful and diverse portfolio of brands and businesses, and we're
focused on leveraging them to drive growth and create value for its
shareholders,” said Mark Parker, President and CEO, Nike, Inc. “It
pays to be prudent in times like these. It's also essential that we remain on
the offense, creating opportunities. We do that by connecting with consumers,
designing innovative products and delivering amazing experiences. That's how we
continue to lead this company and the industry into the future.”
Revenues for Nike, Inc. increased 18 percent to $6.1
billion. Excluding the impacts of changes in foreign currency, Nike Brand
revenues rose 12 percent. Growth came in every geography except Western Europe,
which was flat due to the negative impact from changes in the timing of
shipments and comparisons to last year's strong World Cup related sales.
By category, revenues were up on a currency neutral basis
in all key categories except Football (Soccer), which had a challenging prior
year comparison given the World Cup last year. Revenues for its Other
Businesses increased 10 percent, including 2 percentage points of benefit from
changes in currency exchange rates, as growth in Converse, Cole Haan and Nike
Golf offset lower revenues at Hurley and Umbro.
Gross margin
declined 270 basis points to 44.3 percent mainly due to higher product costs
and a higher mix of off-price revenues sold at a lower margin than the prior
year. These factors more than offset the positive impact of growing sales in its
Direct to Consumer operations, select pricing actions and the benefits of
ongoing product cost reduction initiatives.
Selling and administrative expenses grew at a slower rate
than revenue, up 9 percent to $1.8 billion. Demand creation expenses increased
2 percent to $692 million driven by marketing support for key product
initiatives and investments in retail product presentation for wholesale
accounts. Operating overhead expenses increased 14 percent to $1.1 billion due
to additional investments made in its wholesale and Direct to Consumer
businesses.
Other expense, net was $18 million, comprised largely of
foreign exchange losses, primarily from currency hedges. For the quarter, we
estimate the year-over-year change in foreign currency related losses included
in other expense, net combined with the impact of changes in foreign currency
exchange rates on the translation of foreign currency-denominated profits
increased pretax income by approximately $32 million.
The effective tax rate was 24.3 percent compared to 26.0
percent for the same period last year, an improvement due primarily to a
reduction in the effective tax rate on operations outside the United States.
August 31, 2011 Balance Sheet Review
Inventories for
Nike, Inc. were $3.1 billion, up 41 percent from August 31, 2010. Inventories
were higher compared to a year ago due to higher average unit product cost,
growth in total units and changes in currency exchange rates. Nike Brand unit
inventories were higher as a result of strong demand and elevated product
deliveries as manufacturing partners have expanded production capacity to more
closely align with demand. Also contributing to the growth in Nike Brand units
were strategic pre-builds for key seasonal items with longer production lead
times and growth in its Direct to Consumer business. Relative to revenues and
futures, current unit inventories are broadly consistent with the levels we
reported prior to the 2009 – 2010 economic downturn.
Cash and
short-term investments were $3.7 billion, lower than last year as higher
working capital investments reduced free cash flow from operations, while share
repurchases, dividend payments and long-term debt payments also increased
year-on-year.
Share Repurchases
During the first quarter, Nike repurchased a total of 7.7
million shares for approximately $649 million as part of its fits-year, $5
billion share repurchase program, approved by the Board of Directors in
September 2008. As of the end of the first quarter, Nike has purchased a total
of 38.0 million shares for approximately $3.0 billion under this program.
Futures Orders
As of the end of the quarter worldwide futures orders for
Nike Brand athletic footwear and apparel, scheduled for delivery from September
2011 through January 2012, totaled $8.5 billion, 16 percent higher than orders
reported for the same period last year. Excluding currency changes, reported
orders would have increased 13 percent.
| NIKE, Inc. | ||||||||||||
| CONSOLIDATED FINANCIAL STATEMENTS | ||||||||||||
| FOR THE PERIOD ENDED AUGUST 31, 2011 | ||||||||||||
| (In millions, except per share data) | ||||||||||||
|
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|
QUARTER ENDED |
|
|
|
|||||||
| INCOME STATEMENT | 8/31/2011 | 8/31/2010 | % Chg | |||||||||
Revenues |
|
$ |
6,081 |
|
|
$ |
5,175 |
|
|
18 | % |
|
Cost of sales |
|
3,388 |
2,741 |
|
24 | % |
|
|||||
Gross margin |
|
|
2,693 |
|
|
|
2,434 |
|
|
11 | % |
|
|
|
|
|
44.3 | % |
|
|
47.0 | |||||
